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OUYA Closes $15 Million Round, Sets Up Microconsole Showdown

OUYA, the most well-funded and heavily marketed of a number of approaches to TV-based microconsole gaming, has announced both a $15 million funding round and a three-week pushback on its June 4 retail launch date.

Ouya controller (Photo credit: Saad Faruque)

The round, led by Kleiner Perkins, features investment from graphics company NVIDIA (which is marketing its new mobile processors heavily on their console-like gaming performance, most obviously in their proof-of-concept Project Shield console, and which supplies the Tegra 3 mobile processor powering the OUYA), the Mayfield Fund, Shasta Ventures and Ocean Partners. This nearly doubles the $8.5 million funding the OUYA console raised in its July 2012 Kickstarter campaign. Kleiner Perkins’ Bing Gordon, an EA veteran currently on the board of Zynga, will also join the OUYA board.

This highlights just how small the realizable capitalization from Kickstarter actually is: funding from conventional investment sources still easily exceeds the biggest ever Kickstarter-funded project, the Pebble smart watch. OUYA’s Kickstarter haul is the second-largest in the crowdfunding site’s history, although this may change now that Hollywood stars are starting to see the site’s potential as a way to fund their pet projects. Fora product business, a runaway Kickstarter success may be a useful stepping stone to investment elsewhere, rather than the be-all and end-all of funding, as it both raises profile and demonstrates interest.

Technical issues resolved

Reviews of the initial, developer-centric release of the OUYA console were mixed, with particular criticism for the controller, and the tendency of the thumbsticks to get stuck in place. OUYA Ceo Julie Uhrmann has assured potential customers that this issue has been fixed in the release-to-marketm version, by widening the hole around the base of the stick.

Mobile gaming is indubitably a growth industry – EA’s recent Q4 earnings release saw mobile revenues climb to $109 million (GAAP), up 25% year-on-year, while sales for SonySony and NintendoNintendo‘s handhelds represented a somewhat anaemic $29 million (which itself included a 233% leap for Sony, as the PlayStation Vita fights for traction with gamers). However, mobile-equivalent gaming on TV screens is a case still to be fully made. The current generation of Smart TVs are building gaming into their systems, but primarily as a nice-to-have, and the territory between the dedicated console and the occasional gesture-driven game of Angry Birds remains largely unexplored. The early leader in the “microconsole” field, OnLive, is a sufficiently special case to make comparisons difficult, as it used a mobile processor to stream PC SKUs to the TV, rather than offering on-device Android games.

Head-to-head

The revised store date for the OUYA console is June 25 2013. This sets up an interesting showdown with the scrappy underdog of the mobile console wars, PlayJam Inc’s GameStick. Also Kickstarter funded, Gamestick is a flash drive-sized HDMI dongle (reminiscent of enthusiast devices like the Cotton Candy PC-on-a-stick) – marketed as an “unconsole” promising high-definition Android-based gaming on the TV screen. The release date for the product has itself been pushed back to the last week of June, so if both Gamestick and OUYA now deliver on time there will be a showdown between the $79.99 GameStick and the $99.99 OUYA.

OUYA has certainly received the lion’s share of attention, and promises a more orthodox console experience with its Yves Behar-designed controller looking far more like a conventional Xbox controller than the GameStick’s flattened, modernist gamepad. This funding round also provides a sizeable war chest for promotion. The Tegra 3 is also a better-known and more heavily marketed quantity than the Amlogic processor, featuring two Mali-400 GPU cores, in the GameStick.

Meet the competition – the GameStick

GameStick’s value proposition is also slightly different – the HDMI dongle fits into the gamepad, with the intention of providing a pocketable gaming system which can be easily transported between multiple TVs. However, in a new market cost is often a significant factor, and $79.99 may slide under the “why not” barrier where $99.99 does not – especially when dealing with the tricky challenge of selling a gaming device to people who might not identify as gamers. While OUYA is grabbing the headlines, many developers and potential market entrants will be watching the performance of both consoles with interest.UPDATE: Invited to comment, PlayJam’s CMO, Anthony Johnson, said essentially the above:

The advent of mobile gaming has changed the face of the industry forever, bringing with it access to thousands of high quality yet affordable games to an incredibly wide demographic.

The consumer base for such content is rapidly growing as is the industry that supports it with it’s many thousands of independent studios brimming with innovation.These elements, made possible by the availability of open operating platforms such as Android, have created a perfect storm that is now spilling over into TV, challenging the dominance of the traditional console business.

At an impulsive price point of just $79, GameStick is perfectly positioned between the developers for whom TV has traditionally been a closed shop and the millions of mobile users who have rediscovered their love of play. The device’s uniquely portable form factor is a deliberate nod to the origin of many of the games it will initially carry while the team behind it works with developers to bring in the next wave of purpose-built big screen titles.

So, differentiation on price and to an extent on philosophy – with a more avowedly “pick up and plug” attitude than OUYA, which is aesthetically far more like a sedentary under-one-TV console. Whether products like the GameStick will cannibalize the traditional console business is an interesting question: with a developed TV-app ecosystem, this kind of plug-in smart stick might conversely challenge the Smart TV business, with a dedicated gamepad as a bonus.

Samsung’s Smart TVs are already offering an “evolution” upgrade – in effect a box with an improved processor that plugs in and takes over computing duties. The market for a no-fuss, device-agnostic enabler for dumb TVs seems like a no-brainer – but getting the interface right is quite a challenge. As with the microconsole market, relationships with developers will be critical.

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